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Fall 2002 Newsletter Fall is a time for harvesting and for planning for the future. This issue will help you create a magical holiday without overspending, find out about exciting changes to the CCCS-OC website, consider the importance of having an emergency fund, and review your tax situation to prepare for April 15th. |
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Career Crisis Plunged Family $27,000 into DebtA real-life story from CCCS-OC client, Karen M., whose family overcame a technology change that put them in debt for a decade. |
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CCCS-OC Online ExcitementGreat new features for Debt Management Plan clients and for those seeking a quick way to assess their debt situation. |
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Creating Holiday Magic on a BudgetFind out what makes the holidays magical for your family and learn shopping and buying tips to help you stay in budget. |
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Buying Into the HolidaysThree important questions you should ask yourself before you begin holiday shopping. |
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Establishing an Emergency FundThis holiday season give your family the best gift ever-security. No matter what your budget, you can't afford not to have an emergency fund. |
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The Taxman ComethWant to avoid paying extra on April 15? Examine your income withholding now to prepare for the coming tax season. |
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Sally Says: Just Say No-noAvoid the temptation of cashing in your retirement accounts early. |
| Career Crisis Plunged Family $27,000 into Debt |
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When we married, my husband and I both had well-paying jobs. Then I quit my job one month before our first child was born, figuring we could rely my husband's job to take care of us. Suddenly, he was laid off. Although he immediately began looking for work, he couldn't get another job without retraining. We were left with no income and a new baby. My lowest point came when my sick baby needed medicine. When I realized I couldn't pay for it, I broke into tears in the middle of the store.
| "My lowest point came when I realized I couldn't afford medicine for my sick baby." |
Then grocery stores began accepting credit cards. How lucky for us, we thought. We used them to purchase food, diapers, and medicine. Credit card companies also started issuing checks you could use to pay bills, so we used those for rent, car payments, and utilities. While my husband took classes and worked part-time, I raised money by making crafts and holding yard sales. We sold everything we could, even our furniture. For a long time, we stored our clothes in boxes on the floor.
Eventually, my husband started working as a substitute teacher while pursuing his degree. He could never be sure how often he would work, though. By then, paying the minimum on our credit cards cost us as much as our rent, and those minimum payments only drove us deeper into debt.
Bankruptcy Wasn't An OptionSome of our friends had gone bankrupt, but we wanted to repay our debt. That's where CCCS-OC helped. We met with a wonderful counselor who formulated a repayment plan that would have us out of debt in 48 months. Best of all, he got the credit card companies to lower their interest rates so that more money went to paying off the principle. When he told us we needed to get rid of our credit cards, we gladly cut them up and threw them away forever.
| "Now, we never borrow from the future to pay for today." |
We found the CCCS-OC classes really helpful. I learned to think about money in a different way, and could talk to others going through the same process. Although 48 months seemed like a long time, we were encouraged as the balances kept getting lower.
Now we pay for everything with cash, use a debit card instead of a credit card, and never borrow from the future to pay for today. Going to CCCS-OC was the best thing we ever did. Being in debt felt like drowning in the ocean, but CCCS-OC threw us a lifeline and pulled us to safety.
| CCCS-OC Online Excitement |
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Starting in October, CCCS-OC will implement several significant enhancements to its website, www.cccsoc.org. You'll be able to sign up instantly for our quarterly online newsletter, Money Sense, and can also take advantage of many other new features and services.
DMP Client Account ManagementEver wondered about your current balance? Now you can always find it immediately by using our online Client Account Management site.
Clients participating in the Debt Management Plan
(DMP) can now review and manage:
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To log on, click on CCCS Client Login at the top right of the home page. To get started, you only need your client identification number, which you can find on your paperwork or monthly statement. New users must register and choose a password before entering the site. Keeping your information secure is our highest priority, so our state-of-the-art security system safeguards your data from unauthorized users.
Faster Debt Assessment for VisitorsFor those seeking debt counseling online, our new Debt Assessment page offers visitors the opportunity to get a clear picture of their financial situation. To start, click on Online Assessment at the top right of the home page. This form can be completed online and submitted anonymously to one of our certified financial counselors. Once they receive it, they review your situation and, if appropriate, propose a repayment plan. Of course, we hold all information in strict confidence.
If you would like more information, need your client account number, or would like assistance with the site, please call our Customer Service Department at (800)213-2227.
| Creating Holiday Magic on a Budget |
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Start creating a magical holiday experience by finding out what you and your family consider most important. A good way to determine this is to have everyone in the family complete the Holiday Experience Questionnaire. Compare the answers and agree as a family to focus on fulfilling the top four priorities.
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Holiday Experience Questionnaire Have everyone in your family give each statement a ranking from one to ten, with ten being most important. This holiday season, I most want to: ___ Strengthen bonds with my relatives___ Enjoy being with my family and friends ___ Teach my children about giving ___ Give gifts to the people I care about ___ Receive gifts from people who care about me ___ Give parties and visit friends ___ Give gifts or time to those in need ___ Participate in religious activities ___ Decorate beautifully and make (or eat!) delicious holiday treats ___ Relax and renew my spirit ___ Other |
Strategies for Staying in Budget
With priorities in place, you may find that you still feel obligated to do it all, and by yourself. Stop worrying and allow family members to help. Avoid criticizing them if they do things differently than you. Don't allow yourself to feel pressured to do or spend more than you can afford. Start your preparations early and try using some of the following ideas to make shopping less frantic and your budget more manageable.
| "Less stress means more time to make the holidays happy for you and those you love." |
Make a Budget, and Check it Twice
- By November 1st, set your budget for gifts, entertaining, food,
clothing, decorations and baking.
- Make a list of everyone for whom you'll be making or purchasing a
gift. Decide on a dollar amount or ingredient cost for each one.
Include mailing costs and taxes.
- Keep records of all expenses and receipts to track your spending.
- Avoid credit card use. Instead, use cash or a debit card.
- Split your shopping into two parts. Use the first trip to compare
prices, not to make purchases. The second time, purchase only the
items for which you've price-shopped, and avoid impulse buys.
- Shop early in the season to avoid last-minute gift-giving desperation.
- Hit stores first thing in the morning to dodge crowds and have a better
choice of merchandise.
- Shop sales, but research prices first. Bring advertisements with you
to see if the merchant will match other stores' prices.
- Shop at discount outlets and flea markets first, malls last.
- Gift certificates always make welcome gifts, save time, and make it
easy to stick to your budget.
- Homemade gifts show you care. Be careful, though, that you don't
spend more on ingredients than you budgeted for, and that the assembly
time doesn't take away from other priorities.
- Create a thoughtful coupon that offers services like a car wash, babysitting, a homemade batch of cookies, or a day at the park.
| Buying Into the Holidays |
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Stores have already begun displaying holiday decorations, signaling the start of the year's busiest shopping season. Advertisers insist the best way to show love is to buy gifts. But is our love and appreciation best expressed by making purchases that drive us into debt?
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| Marilyn August, Instructor Money-Health and Wisdom | |
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"No way," says money maven Marilyn August, creator and facilitator of the CCCS-OC seminar Money-Health and Wisdom. "While a wonderful gift at this time of year is entirely appropriate, problems start when gift giving feels obligatory. This empty-hearted giving starts up a joyless cycle: The recipient senses that the gift was given out of obligation, and finds himself responding in the same way -- out of obligation. Financial stress results, and for no worthwhile reason."
A Gift from the HeartBut a gift given in the holidays' true spirit can indeed be a symbol of love and appreciation. So, before you crack open the credit card and splurge on expensive gifts, ask yourself:
- What do the holidays really mean to me?
- What is the spirit and symbolic meaning behind my gift giving?
- What is it I want my gift to convey to the recipients?
Clarify these first things first to give direction and meaning to your gift giving.
| "Strive to meet the emotional reasons behind giving the gift, while staying within a reasonable budget." |
Another way to ensure an emotionally safe and guiltless holiday season is to enter into mutual agreements regarding gift giving with family, friends, and co-workers. You may agree to limit the gift's cost, decide that presents must be homemade, or draw names.
Keep It Simple and SpecialBy keeping celebrations simple, you'll be putting the focus where it should be -- on connecting with others at this special time of year. It doesn't take money to have a memorable holiday, but it does take a willingness to give up old money myths, and replace them with clear intentions and financial integrity.
| Establishing an Emergency Fund |
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This holiday season give your family the best gift ever -- security. No matter what your budget, you can't afford not to have an emergency fund.
Establishing an emergency fund to cover unexpected expenses like illness, job loss, or car repairs can make the difference between getting by or going under. Instead of relying on a credit card for emergencies (and paying two-digit interest for the privilege), start a savings account that's strictly to pay for emergencies. It's practically painless with direct deposit, as you can request a portion of each paycheck be deposited directly into the account of your choice. Otherwise, make a commitment to deposit a specific amount, no matter how small, into your emergency fund, then stick to it.
| "An emergency fund can make the difference between going under or getting by." |
Even if you're on a tight budget, you need to save for emergencies. Here are some ideas on how to get started and stay committed:
Start small. Begin by saving one percent of each paycheck. You won't miss such a small amount on a weekly basis, so this practice will help you stay consistent. Once you see the money adding up you may be encouraged to increase the percentage or begin saving for other goals, such as a vacation or a down payment on a house.
Make it a family affair. Teach your children to set aside one percent of their money as well. It may seem silly to have a 5-year-old put away a penny of each dollar they receive, but starting young creates a habit that can benefit them their entire life. Share with your children why an emergency fund is necessary and how it helps the family stay financially healthy.
Define emergency. As a family, decide what constitutes an emergency. Write it down and agree that before any funds are withdrawn the whole family must determine that the problem fits the definition.
Get started now. As the saying goes, "the best time to start is yesterday, and the second best time to start is today, because when you plan to start tomorrow, you seldom do."
| The Taxman Cometh |
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Lowering the amount withheld from your paycheck for taxes may seem like an easy, quick fix for a cash shortage. However, you could be digging yourself into a deep and expensive hole, as you may be liable for additional taxes on April 15.
You might end up owing money if you:
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Don't wait until taxes are due to estimate what you owe. Add up the amount withheld by your employer so far this year, estimate how much more will be withheld by year's end, and compare this total to last year's tax return. Take into account any changes that may affect your tax situation, such as higher or lower income, divorce or marriage, or children born or leaving home. Estimate the total you need and divide it by the six months left before taxes are due. Finally, be sure to change your withholding to the correct amount so that you won't have a problem next year.
| Sally Says: Just Say No-no |
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Taxes have always held a special fascination for me. My mother owned an H & R Block office for over 20 years and, as a little girl, I spent many hours playing in the office while she worked. I remember one year she had hundreds of unhappy clients, when a local company changed ownership. Although no one lost their jobs, everyone was cashed out of their 401k retirement accounts. Instead of rolling the windfall into another retirement fund and avoiding the fees and penalties, virtually all of the employees used the money to buy new cars, boats or homes. Few thought ahead to tax time and that they would be in a much higher tax bracket and owe more taxes. Most of them lost up to 50% of the money they had worked so hard to save. The town learned a lesson -- don't cash in your 401k before you retire, and if you do, be sure to consider the tax implications.
| "Your retirement plan shouldn't be thought of as a back-up emergency fund that you use to pay bills, make large purchases, or cover times of unemployment." |
Although you may be able to borrow from your 401k for certain reasons, the road to paying it back can be long and hard. Counting on the kids to support you in your old age is a less than foolproof plan, as is planning on working part-time, or relying on your spouse's income. Retirement should be fun, not worrisome, so protect your future financial health by protecting your 401k investment.